Expert: Dr. Joseph de Beauchamp - 5/24/2006

Question
Hey, I'm a beginning investor (just 18) and I'm trying to get my feet wet in investing so I'll have experience later on when my investing decisions will really affect me. As my first purchase, I bought a few shares of Getty Images (GYI) at around 80. It was holding steady there for awhile, then plummeted to 60 before rebounding to about 65 where it is now. I checked the news when it started dropping, and it looks like the only bad news around the time it started dropping was that it missed earnings estimates by a penny a share, which doesn't seem significant enough to warrant a 20 point drop to me, especially since the fundamentals of the company still seem strong. Can you tell me if I should have sold when the stock started dropping, or is my current plan of holding on and trusting that because the company is still fundamentally strong, it'll rebound a valid one?
Also, what do you when a stock starts dropping and you don't know why? (Ie, there's no real bad news that you can see, but it's dropping day after day quite a bit).
I've heard it's a good idea to set a limit of a certain % that you'll let a stock drop before you'll sell it, or a certain % that you'll let it climb before you sell--is this a good idea, and if so, can you offer any guidelines?
And one last question, though if you're not interesting in doing my research for me, that'd be ok. What do you think of American Standard (ASD)? I've checked the reports and it's got good earnings, a reasonable P/E and no red flags, so I think that'll be my next investment, but there might be something there that a more seasoned investor would spot that I would miss (Like with GYI, I noticed that the fundamentals were good when I bought it but I didn't realize that the P/E was dangerously high). If scouring through info on ASD is not so fun, then could you tell me a few things I should watch out for that I might not realize? Thanks :)  

Answer
I never recommend anyone buy single stocks, unless they have the funds to purchase more than 10 different stocks. Mutual funds are the best and only place for you to go. Go to the local public library and pull up Morningstar and read through the mutual funds. There are many mutual funds that do much better than the direction you thoughts are going. Simply your life with a good mutual fund. Furthermore, I would not have recommended a purchase of either stock you mention, even if you were Bill Gates.

Dr. deBeauchamp